International Law Advisory - Additions to BIS Unverified List for Export Control Compliance

Yesterday, the Bureau of Industry and Security (“ BIS ”) published a notice in the Federal Register (70 Fed. Reg. 62,295) adding five entities to the Unverified List, and assigning each entity “red flag” status, for which heightened scrutiny is required under the “Know Your Customer” requirements of Supplement No. 3 to 15 C.F.R. part 732.    

The Unverified List was established by BIS in June of 2002 as a preventative enforcement mechanism for individual export transactions.  The list includes foreign persons who were parties to past transactions for which BIS was unable to perform, due to reasons outside of the U.S. Government’s control (including the lack of cooperation by the host government authority, the end-user, or the ultimate consignee), a pre-license check (“ PLC ”) or post-shipment verification (“PSV”).  PLCs are undertaken by the BIS to verify the bona fides of a particular transaction and to substantiate the suitability of the ultimate end-user.  PSVs are undertaken by BIS to ensure that U.S. exports are actually delivered to the appropriate end-user, are being used in conformity with the terms of any relevant license or exception, and are otherwise in accordance with the Export Administration Regulations (“ EAR ”) (15 C.F.R. parts 730 to 774).  BIS has instructed that when a party listed on the Unverified List participates in a proposed transaction, pursuant to Supplement No. 3 to 15 C.F.R. part 732, a “red flag” is to be raised with respect to the transaction and the exporter has an affirmative duty to inquire, verify, and generally substantiate that the transaction does not involve proliferation activity prohibited by 15 C.F.R. part 744 or otherwise violate EAR .  Thus, such transactions require heightened scrutiny by the exporter prior to proceeding. 

BIS  has added the following five entities to the Unverified List:

• T.Z.H. International Co. Ltd., Room 23, 2/F, Kowloon Bay Ind Center,  No. 15 Wany Hoi Rd , Kowloon Bay, Hong Kong, Special Administrative Region;
• Design   Engineering Center, House 184, Street 36, Sector F-10/1, Islamabad , Pakistan;
• Kantry, 13/2 Begovaya Street, Moscow, Russia 125284;
• Elaton Company, 20B Berezhkovskaya Naberezhnaya, Moscow, Russia;
• Pskovenergo Service, 47-A Sovetskaya Street, Pskov, Russia Federation, 180000

Companies should update their screening mechanisms to ensure that their business relationships and transactions are in compliance with the revised Unverified List. 

We will continue to keep you apprised of sanctions and export control developments.  If you have any questions please feel free to contact Ed Krauland at 202.429.8083 or Meredith Rathbone at 202.429.6437.